Thistle Hotels disappointed the City despite announcing profits 73 per cent ahead at pounds 60.1m in its first full-year figures since coming to the market last October. Its shares closed 8p lower at 198p.

Robert Peel, chief executive, said: "Key drivers to hotel profitability - volume and rate - have been growing steadily since April 1993 and improved strongly in 1996."

But analysts said the profits were slightly worse than expected, especially in the light of sparkling numbers from rival Millennium & Copthorne earlier this week.

As with Millennium & Copthorne, Thistle benefited from the high operating gearing of the hotel industry, converting 69 per cent of extra turnover compared with the previous year into profit. Mr Peel said Thistle had had a strong start to the current year with sales, volume and room rates all growing well.

In the 12 months to December, turnover increased to pounds 290.3m despite a heavy refurbishment programme that took rooms out of commission during the period.

Earnings per share rose 35 per cent to 10.2p and, as promised at the time of the float, a 2p dividend was paid.

Thistle, formerly known as Mount Charlotte Hotels, said average occupancy increased to 66.7 per cent from 65.7 per cent, while the average room rate rose 14 per cent to pounds 55. Thistle is shifting towards business travellers and away from discounted tourist packages. The commercial sector accounted for 38 per cent of room nights sold at Thistle's London hotels but accounted for 52 per cent of revenue in the capital.

The strategy helped lift operating profit 20 per cent to pounds 106.7m. At the time of the public offering, Thistle forecast 1996 operating profit of not less than pounds 100m.

Thistle, 46 per cent owned by New Zealand's Brierley Investments, raised about pounds 250m at flotation to repay debt and invest in its 100 hotels under several brands. The company plans to expand its four-star Thistle brand from 51 properties to more than 70 by the end of 1998 by rebranding hotels. It will also remodel some hotels to increase total capacity by about 2,000 rooms.